Outside the purview of the National Governors' Association, GOP governors are working with leading congressional Republicans on a plan to turn over responsibility for Medicaid to the states in exchange for capping program spending, sources said last week.
Providers are concerned that in their zest to gain control of the Medicaid program, the governors will accept such Draconian funding cuts that provider reimbursements will suffer (See related story, p. 31).
Included in the options being considered by the Republicans would be continuing the current federal entitlement to healthcare but paying states a per-capita amount for each eligible beneficiary. That amount would be based on the current state-by-state Medicaid spending levels.
Federal lawmakers also want to cap the growth of the per-capita reimbursement rate to save budget dollars.
Another possibility is that the federal entitlement to healthcare would be ended, and states would simply receive a lump sum payment based on current state-by-state spending. Future increases in those lump sums also would be capped. That plan puts states, and therefore providers, at greater risk should the number of poor increase, as occurs in a recession.
"We are against ending the entitlement and going to a block grant," said Christine Burch, executive director of the National Association of Public Hospitals. "That would expose (hospitals) to even more cuts as states look to control costs."
According to the Congressional Budget Office, federal spending for Medicaid, projected to be $90 billion this year, is expected to grow at an average rate of more than 10% for the next seven years.
Under the plans being considered by Republicans, growth would be capped at 5% per year, producing federal budget savings of more than $180 billion over the seven-year period.
"What we're talking about is considerably less than the projected growth rate" of more than 10%, said Mike Lawrence, spokesman for Illinois Gov. Jim Edgar, who's heading the negotiation team.
While states would get considerably less funding, Lawrence said the governors' proposal would allow states to manage the Medicaid dollars more cost-effectively and make up for the lost revenue from the federal government.
However, providers are concerned that states are putting their desire to move out from under federal regulation ahead of their fiscal well-being.
The governors "are being driven by their ideology," said one provider lobbyist. "There is no way they can make this work without either drastically reducing provider reimbursements, cutting benefits or tightening eligibility."
Providers are not the only critics. Democrats say they do not want to turn Medicaid over to states without federal supervision. They also argue that using current Medicaid spending as a benchmark would penalize states that now have relatively low funding.